Chapter 5 Other Markets and Investments Flashcards
What do Cash Deposits compromise of?
Accounts held with banks or other savings institutions, such as building societies.
How much is the personal savings allowance?
£1000 for basic rate tax payers and £500 for higher rate tax payers.
Name an advantage of investing in cash deposits.
Liquidity, dependent on account type
A savings vehicle (interest generation)
Not too exposed to market volatility
Name an disadvantage of investing in cash deposits.
Deposit taking institutions vary in their credit-worthiness, they may default.
Inflation reduced the real returns being earned on cash deposits, after tax could be negative.
Interest-rates vary and as such cash-based deposit returns will also vary.
Who covers deposits up to £85,000 in the UK?
The FSCS (Financial services compensation scheme)
What are the three types of crypto assets according to the FCA?
Exchange Tokens
Security Tokens
Utility Tokens
What are the three types of UK Money Market Instruments?
Treasury Bills - Essentially similar to ZCO, bought for £99, sold for £100.
Certificates of Deposit (CDs) - Issued by banks in return for deposited money and are tradable on the money markets.
Commercial Paper (CP) - Corporate equivalent of a treasury bill.
What is a mutual fund?
Property bond issued by insurance companies.
Which two money market sectors did the IA introduce from Jan 2012?
Short-Term Money Market Funds - Have a constant or fluctuating net asset value (NAV)
Money market funds - Have a fluctuating NAV
Name 4 of the 6 most commonly quoted currency pairs
USD/JPY
EUR/USD
USD/CHF (swiss)
GBP/USD
EUR/GBP
What is a spot transaction?
The rate quoted by a bank for the exchange of one currency for another with immediate effect. However, T+2.
What is a forward transaction?
Money does not change hands until future date, for fixed sum.
What is a future?
A standardized version if forward transactions that are traded on derivatives exchanges for standard sizes and maturity dates. Avg length of 3 months.
What is a swap?
Two parties exchange currencies for an agreed length of time where the transaction will then be reversed at a later date.
What is the forward exchange rate?
The exchange rate set today for a settlement at a future date.
